News

5 Ways to ‘Fix’ Retransmission Consent

3/15/2010 1:58 PM Eastern

Retransmission consent has re-entered
the public consciousness in a big way in the past few
months, with two high-profile battles in New York and
more on the way.

And last week, a group of cable operators led by Time
Warner Cable formally petitioned the Federal Communication
Commission to do three things that would bring an
end to public fights and nasty deadlocks. The petition asks the FCC to
require independent arbitration during retransmission-consent disputes,
interim carriage during that arbitration and to untie retransmission-
consent negotiations from those involving other programming
services, such as co-owned cable channels and even Internet content.
FCC chairman Julius Genachowski told the Senate last week that the
agency was looking into whether “this framework makes sense or reforms
are neccessary.”

The effort may have some traction, as rivals from other industries are
considering the move, including satellite-TV giants Dish Network and
DirecTV, as does telco Verizon Communications. Cable operators Mediacom
Communications and Charter Communications support the
move, as well as public-advocacy group Public Knowledge.

And a group of nine distributors and two associations (the American
Cable Association, Bright House Networks, Cablevision
Systems, Charter, DirecTV, Dish Network,
Insight Communications, Mediacom, the Organization
for the Promotion and Advancement of Small
Telecommunications Companies, Suddenlink
Communications and Time Warner Cable) last
week wrote a joint letter to congressmen and
senators asking for
their help in rectifying
the “imbalance”
in
retrans negotiations.

That the
fight has escalated to this point is no accident. On March 8, Cablevision
Systems reached a tentative agreement with Walt Disney Co.’s WABC
broadcast station in New York which put the station back on the air
about 10 minutes into the 82nd Annual Academy Awards broadcast.
Th at battle, marred by increasingly nasty print, radio and television
attack ads, came on the heels of another bout between Fox Broadcasting
and Time Warner Cable, which ended Jan. 1 after months of namecalling.

Time Warner is expected to re-enter the fray in the summer — its
carriage deal with ABC/Disney ends on Aug. 31.

While most programmers believe the system is fair, distributors
have their own solutions to end the stalemates. Multichannel News
talked to parties on both sides and listened to the various fixes. On
the less-feasible side are calls to rein in sports salaries, which some
argue is the real culprit in high programming costs. Most of the likely
changes — if any come at all — would require FCC authority to make
both sides negotiate in good faith.

1.  Require Binding Arbitration:
Cable operators have been
calling for this measure
for years, starting with Mediacom’s
storied battles in the Iowa
market with Sinclair Broadcast
Group. The call for binding arbitration
was again sounded in
recent disputes — both Time
Warner Cable and Cablevision
Systems asked for it during
their recent scuffles with Fox
and ABC, respectively. The concept
is simple: if a broadcaster
and distributor cannot reach
an agreement on their own as
the deadline approaches, then
an independent third party arbitrator
would step in to settle
the dispute. Whatever the arbitrator
decides would be binding
for both parties. How hard
would it be to impose? The FCC
could conclude that the marketplace
had changed sufficiently
in the past almost two decades
to justify arbitration under the
fair-dealing provision. Congressional
involvement is uncertain.
Sen. John Kerry (D-Mass.) was
expected to introduce a bill requiring
arbitration, but he’s
since said that he would not pick
sides in the dispute.
Pros: Th e threat of arbitration
itself could spur both distributors
and programmers to hammer
out an agreement, mainly to
avoid the risk of having a worse
deal imposed on them by an independent
arbitrator. And in the
event of arbitration, at least a deal
would be reached that would ensure
no interruption of service.
Cons: Arbitration doesn’t work.
Th e FCC has tried the arbitration
route for smaller networks in carriage
disputes — most notably the
America Channel — and years
into the process, that network still
hasn’t found its way onto all systems.
Th ere could be a downside
for cable, too, if it pushed some
so-called must-carry stations to
instead choose retransmission
consent.

2. Guarantee Interim Carriage:
This would prohibit broadcasters
from yanking their
signals during good-faith negotiations.
Since retransmission
disputes also tend to crop up
around major television events
— like the Super Bowl and, most
recently, the Academy Awards —
several politicians have jumped
on this bandwagon, including
Kerry, Rep. Rick Boucher (D-Va.)
and Rep. Joe Barton (R-Texas).
Kerry has
called for limit
ing programmers’
rights to pull their
signals during disputes. The prohibition
would be little change
from laws that require distributors
not to pull signals during
ratings sweeps periods. The FCC
has not read its good faith bargaining
authority broadly, but
pressure from Congress and a
changed marketplace could justify
the change, particularly given
that Congress wrote into the law
the prohibition on pulling signals
during sweeps. “It is not as big a
stretch as starting from zero,” said
one veteran communications attorney.
“The big question is, ‘Does
retrans look in 2010 anything like
what it did in 1992?’ ”
Pros: Keeping the channels on
the air would appear to serve the
interests of all parties — distributors
are able to negotiate without
constantly looking over their
shoulders, customers get to watch
the programming they want to
and programmers don’t have to
reimburse advertisers for any
lost audience. The provision also
could protect smaller operators
who may be more vulnerable to
getting their signal pulled than
distributors in larger areas.
“There are no established rate
cards for these broadcast signals
to ensure transparency so that
different distributors pay the
same price in a DMA,” said Mediacom
chairman and CEO Rocco
Commisso. “Consequently, the
price paid becomes a function of
relative leverage and the smaller
distributors suffer the most.”
Cons: Removing a programmer’s
ability to pull his signal cuts
out their biggest bargaining chip
in retransmission consent negotiations.
From a programmer’s
perspective, a distributor has no
incentive to reach a deal because
it is more than willing to keep
the process going on indefi nitely,
paying the older, lower rates.

3. Repeal or Reform the Cable
Act:
Another favorite of
distributors, who claim
the 1992 Cable Act — which
created the must-carry and
retransmission-consent regime
— is an outdated law written
during a time when the broadcasting
and cable businesses
were vastly diff erent from what
they are today. One suggestion
is to replace retrans with a local-signal compulsory license,
like the one that allows satellite
providers to import distant network
TV-station signals. Gigi
Sohn, president and co-founder
of fair-use lobby Public Knowledge,
said she would be fi ne
with that, but that must-carry
should be retained as well.
Commisso said the retrans
laws were enacted almost 20
years ago to protect broadcasters
from being dropped by the perceived
cable monopolies. “Today
the roles are reversed,” Commisso
said. “Competition among
cable, satellite, and telephone
video providers is fierce, while the
broadcasters retain governmentgranted
exclusivity for their signal
in any given DMA. This monopoly
power permits them to hold hostage
different pay TV distributors
at different times, and we either
have to cave in to their exorbitant
price demands or be forced
to drop the signal.”
Pros: Changes have been made
to the act before, through the
passage of other legislation. The
Telecommunications Act of 1996
— passed during a Democratic
administration — eliminated restrictions
on cross-ownership between
telecommunications and
cable service providers, which
allowed cable companies into the
phone business and vice versa.
Cons: Asking the government to
step in on this matter also could
invite them to scrutinize parts of the business distributors and programmers
don’t want changed.
And it could take years — it took
four years and another presidential
administration for Congress
to pass the Telecommunications
Act of 1996, and the 1992 Cable
Act itself was an update of a 1982
law that included onerous pricing
structures.

4. Allow Importing of Distant
Signals:
Current law allows
satellite TV service providers
to import distant broadcast signals only to households that
cannot receive “a same network
over the air local signal of suffi-cient intensity,” according to the
National Cable and Telecommunications
Association. And they
are usually not allowed to offer
distant signals to new customers
in any market where they currently
off er local broadcast signals.
Pros: Being able to offer distant
signals would serve the
public interest in allowing viewers
uninterrupted access to programming.
And it would benefi t
distributors, because subscribers
would not have to defect to competitive
services like telco video
or satellite TV to receive the programming.
Cons: Replacing a local signal
with a distant one could run into
complaints about a lack of local
news or sports, something Congress
is attuned to on the satellite
side. Aside from the obvious competitive
issues (What’s to stop another
broadcaster from doing the
same in their retrans negotiations?),
there are also copyright
issues. Currently, cable operators
must black out network programming
from distant stations.
Th e FCC would need to scrap its
network-duplication rule, and
perhaps would have to prevent
networks or other distributors
from including language in their
programming contracts that disallows
out-of-market retransmission
consent.

5. Mandatory Unbundling of
Programming:
Often, retransmission
consent deals
expire in concert with cable-carriage
deals for channels owned by the same programmer. In
the past, that has allowed some
distributors to technically avoid
paying cash for broadcast networks
— they would instead
agree to carry a fledgling cable
channel owned by the same
company or pay more for an existing
cable channel.
But as the industry has matured,
distributors have accused
programmers of using cablenetwork
carriage negotiations as
a club for retransmission consent
by, say, withholding a broadcast
signal unless the cable channel
is carried.
Pros: Distributors argue that
they should be allowed to negotiate
the value of each channel
separately, on its own merits. So
the amount a distributor pays for
a broadcast station would not be
unduly influenced by its ability to
continue to carry a popular cable
network or group of networks.
Cons: Breaking out negotiations
into separate deals for each individual
channels could have two
unwanted implications: it could
drag out the process of negotiation
much longer and it would add more fuel to the push to a lacarte, or selling channels individually.
While cable operators have
long wanted to put expensive cable
channels on tiers, they have
systematically avoided a lacarte
as bad for business. So have the
programmers, who are loath to
give up the ad revenue and carriage
fees they currently receive
by being located on the basic tier
of service.

November

Next TV

Affinia Manhattan, New York, NY